Colby Motors Uses the Accrual Method and Reports on a Calendar

question 35

Essay

Colby Motors uses the accrual method and reports on a calendar year. In December of last year, Colby acquired auto repair equipment. As part of the acquisition, Colby purchased a warranty agreement that requires the seller of the equipment to provide repairs on the equipment for three years. Colby paid the cost of the warranty, $15,000, in January of this year. What can Colby deduct for the cost of the warranty on the tax return for last year?

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Definitions:

Minority Members

Individuals who are part of a smaller or less dominant group within a larger community or organization, often distinguished by cultural, ethnic, or racial identities.

Social Responsibility

The ethical framework suggesting that entities, whether individuals or organizations, have an obligation to act for the benefit of society at large.

Ethical Issues

Situations or problems requiring a choice between actions that must be evaluated as morally right or wrong based on ethical principles.

Natural Environment

The physical, biological, and chemical surroundings in which an organism lives, including all external factors that affect its survival and development.